What the Form Is For

Schedule D (Form 1040) is the IRS form you use to report profits and losses from selling investments and other capital assets during the 2018 tax year. Think of it as your master summary sheet for tracking all the times you sold stocks, bonds, real estate, mutual funds, or other investments. Whether you made money or lost money on these sales, Schedule D is where you calculate your total capital gains or losses and determine how much tax you owe (or how much loss you can deduct).

A "capital asset" is essentially any property you own for personal use or investment purposes—your house, car, furniture, stocks, cryptocurrency, and even collectibles like coins or art. When you sell these assets for more than you paid, you have a capital gain. When you sell for less, you have a capital loss. Schedule D works hand-in-hand with Form 8949 (Sales and Other Dispositions of Capital Assets), which lists each individual transaction in detail before the totals flow to Schedule D IRS.gov.

The form separates transactions into two categories: short-term (assets held one year or less) and long-term (assets held more than one year). This distinction matters because long-term capital gains typically receive more favorable tax treatment than short-term gains, which are taxed at your ordinary income rate.

When You’d Use Schedule D (Late/Amended Filing)

For the 2018 tax year, Schedule D was due with your Form 1040 on April 15, 2019 (or April 17, 2019, due to the Emancipation Day holiday in Washington, D.C.). If you missed this deadline or discovered errors after filing, you can file an amended return using Form 1040-X.

To claim a refund, you generally must file Form 1040-X within three years from the date you filed your original 2018 return, or within two years from the date you paid the tax, whichever is later. However, certain elections related to capital gains—such as the rollover of gain from empowerment zone assets—may have different deadlines. If your original 2018 return was filed on time, you can make certain elections on an amended return filed no later than six months after the original due date IRS.gov.

You'd file an amended Schedule D if you received corrected Form 1099-B statements after filing, discovered unreported transactions, made calculation errors, or became eligible for special tax elections. For example, legislation enacted in December 2019 retroactively extended certain empowerment zone benefits to 2018, requiring eligible taxpayers to file amended returns.

Key Rules or Details for 2018

Several important tax rules and changes affected Schedule D filers in 2018:

Tax Cuts and Jobs Act Changes

The 2018 tax year was the first full year under the new tax law. While long-term capital gains rates (0%, 15%, and 20%) remained, the income thresholds changed. The maximum capital loss deduction remained at $3,000 ($1,500 if married filing separately).

Form 8949 Requirement

Most capital asset sales must first be reported on Form 8949 before totals transfer to Schedule D. You can skip Form 8949 only for certain transactions where your broker reported your cost basis to the IRS on Form 1099-B and you have no adjustments to report IRS.gov.

Holding Period Changes

For most assets, short-term means held one year or less, and long-term means held more than one year. However, beginning in 2018, certain "applicable partnership interests" held in connection with performance of services require a holding period of more than three years to qualify for long-term treatment.

Cryptocurrency Reporting

Virtual currencies like Bitcoin are treated as property for tax purposes. Sales, exchanges, or uses of cryptocurrency to purchase goods or services must be reported as capital transactions.

Qualified Opportunity Funds (QOFs)

New in 2018, taxpayers could elect to defer eligible capital gains by investing in QOFs within 180 days. This deferral could postpone tax until 2026 or until the QOF investment is sold IRS.gov.

Main Home Sale Exclusion

You can exclude up to $250,000 ($500,000 for married couples filing jointly) of gain from selling your main home if you meet ownership and use tests—generally owning and living in the home for at least two of the five years before the sale.

Step-by-Step (High Level)

Here's how to complete Schedule D for 2018:

Step 1: Gather Your Documents

Collect all Forms 1099-B from brokers, Forms 1099-S from real estate transactions, and records of your purchase costs (basis) and sale proceeds for all capital asset sales during 2018.

Step 2: Complete Form 8949 First

Most transactions require Form 8949 before Schedule D. Separate transactions into categories based on whether basis was reported to the IRS and whether you have adjustments. Report short-term transactions in Part I and long-term transactions in Part II.

Step 3: Transfer Totals to Schedule D

Once Form 8949 is complete, transfer the totals to the appropriate lines on Schedule D. Short-term transactions go to Part I (lines 1–7), and long-term transactions go to Part II (lines 8–15).

Step 4: Add Other Gains and Losses

Include capital gain distributions from mutual funds (line 13), gains from other forms like Form 4797 or Form 6252, and any capital loss carryovers from prior years.

Step 5: Calculate Net Gain or Loss

Combine your short-term results (line 7) and long-term results (line 15) to arrive at your overall net capital gain or loss (line 16 in Part III).

Step 6: Determine Tax Treatment

If line 16 shows a gain, you may need to complete additional worksheets (28% Rate Gain Worksheet, Unrecaptured Section 1250 Gain Worksheet, or Qualified Dividends and Capital Gain Tax Worksheet) to calculate your tax at preferential rates. If line 16 shows a loss, you can generally deduct up to $3,000 against other income, carrying forward any excess to future years IRS.gov.

Step 7: Complete Carryover Worksheet

If you have capital losses exceeding the $3,000 annual limit, use the Capital Loss Carryover Worksheet in the Schedule D instructions to calculate what carries forward to 2019.

Common Mistakes and How to Avoid Them

Mistake 1: Not Reporting All Transactions

Even if you received multiple 1099-B forms or the amounts seem small, you must report all capital asset sales. The IRS receives copies of your 1099-B forms and will notice missing transactions. To avoid this, carefully review all brokerage statements and create a checklist of transactions.

Mistake 2: Using Incorrect Cost Basis

Many taxpayers forget to include reinvested dividends in their cost basis, leading to overpaid taxes. Keep detailed records of all purchases, including reinvestments, stock splits, and adjustments. If you inherited property, use the fair market value on the date of death, not the original owner's purchase price.

Mistake 3: Ignoring Wash Sales

If you sell a stock at a loss and buy substantially identical stock within 30 days before or after the sale, the loss is disallowed. Your broker may report wash sales on Form 1099-B, but you're responsible for tracking wash sales across different accounts or related securities. Review Form 1099-B box 1g carefully IRS.gov.

Mistake 4: Incorrectly Classifying Short-Term vs. Long-Term

Count from the day after you purchased the asset to the day you sold it. If you owned it for exactly one year, that's still short-term. Only holdings of more than one year qualify as long-term.

Mistake 5: Deducting Personal-Use Losses

Losses from selling personal property (vacation home, personal car, furniture) are not deductible. Only investment property losses can offset gains. If you received Form 1099-S for a personal property sale at a loss, you still must report it, but the loss isn't deductible.

Mistake 6: Forgetting Capital Loss Carryovers

If you had capital losses in 2017 that exceeded the $3,000 limit, you must carry forward the unused amount to 2018. Check your 2017 return and complete the Capital Loss Carryover Worksheet.

Mistake 7: Mixing Up Forms 8949 and Schedule D

Form 8949 reports individual transactions; Schedule D summarizes totals. Don't skip Form 8949 unless you're specifically eligible for the exception on lines 1a or 8a.

What Happens After You File

Once you file your 2018 Form 1040 with Schedule D attached, the IRS processes your return and matches the information against Forms 1099-B and 1099-S received from brokers and real estate transactions. Here's what to expect:

Processing Time

In 2019, most electronically-filed returns were processed within 21 days, while paper returns took six to eight weeks. If your Schedule D contained errors or discrepancies with information reported by third parties, processing could take longer.

Matching Program

The IRS uses an automated system to match the gross proceeds and basis information on your Schedule D against what brokers reported. If there's a mismatch, you may receive a CP2000 notice (Underreporter Inquiry) proposing additional tax, typically 12 to 18 months after filing.

Refunds

If your capital losses or other factors result in a refund, the IRS typically issues it within the standard processing timeframe. You can track your refund status using the "Where's My Refund?" tool on IRS.gov.

Audits

Returns with Schedule D aren't automatically flagged, but certain red flags increase audit risk: unusually large losses without supporting documentation, failure to report transactions shown on Forms 1099-B, or claiming losses from related-party sales. Keep all documentation for at least three years from your filing date IRS.gov.

Carryforward Tracking

If you have capital losses exceeding the $3,000 limit, you'll carry the excess forward to 2019 and beyond until fully used. The IRS doesn't automatically track this for you—maintain your own Capital Loss Carryover Worksheet each year.

Amended Returns

If you discover errors after the IRS processes your return, you can file Form 1040-X within the statute of limitations (generally three years). The IRS will review your amended Schedule D and either accept the changes or request additional information.

FAQs

Q1: Do I need to report the sale of my main home on Schedule D?

Not always. If you qualify for the home sale exclusion (up to $250,000 or $500,000 of gain excluded) and didn't receive Form 1099-S, you don't need to report the sale. However, if you received Form 1099-S, or if your gain exceeds the exclusion amount, or if you used part of your home for business or rental, you must report it on Form 8949 and Schedule D IRS.gov.

Q2: Can I deduct losses from selling my personal car or jewelry?

No. Losses from selling personal-use property aren't deductible. Only gains from selling personal property are taxable. However, investment property losses (stocks, bonds, rental property) are deductible against gains and up to $3,000 of ordinary income.

Q3: What if I forgot to report a stock sale on my 2018 return?

File an amended return (Form 1040-X) with a corrected Schedule D as soon as possible. Include an explanation and any corrected Forms 8949. If the unreported sale resulted in additional tax owed, include payment with your amended return to minimize penalties and interest.

Q4: How do I know if my holding period is short-term or long-term?

Count from the day after you purchased the asset through the day you sold it. If the total is 365 days or less, it's short-term. Day 366 and beyond is long-term. For stocks, your broker typically indicates this on Form 1099-B. Note: certain partnership interests require more than three years for long-term treatment starting in 2018.

Q5: Can I use capital losses to offset ordinary income like wages?

Only up to $3,000 per year ($1,500 if married filing separately). Capital losses first offset capital gains dollar-for-dollar. Any excess can reduce ordinary income by up to $3,000, with remaining losses carrying forward indefinitely to future years IRS.gov.

Q6: What if my broker's cost basis is wrong on Form 1099-B?

You can (and should) report the correct basis on Form 8949. Check the appropriate box at the top of Form 8949 and use column (g) to make adjustments. Include a code in column (f) and attach a statement explaining the adjustment if necessary. Keep documentation supporting your correct basis.

Q7: Do I need to report cryptocurrency transactions on Schedule D?

Yes. The IRS treats virtual currencies like Bitcoin as property. Any sale, exchange, or use of cryptocurrency to purchase goods or services is a taxable event requiring reporting on Form 8949 and Schedule D. Even crypto-to-crypto exchanges must be reported.

For More Information: 2018 Schedule D Form: IRS.gov • 2018 Schedule D Instructions: IRS.gov • 2018 Form 8949 Instructions: IRS.gov • Topic 409 (Capital Gains and Losses): IRS.gov • About Schedule D: IRS.gov